The Bank of England is powerless to stop the soaring prices of prime property in London, governor Mark Carney admitted today, but has dismissed fears of a bubble in the wider housing market.

The governor said the Bank could do more little than 'watch' as house prices boom in the capital, fuelled by foreign investors, but played down suggestions that the Government's Help to Buy scheme is hiking prices across the rest of the UK.

Speaking on the BBC'S Andrew Marr show, he said: 'The top end of London is driven by cash buyers. It's driven in many cases by foreign buyers.

Watching: Governor of the Bank of England said the Bank is limited when it comes to controlling house prices.

'We as the central bank can't influence that. We change underwriting standards - it doesn't matter, there's not a mortgage.

'We change interest rates - it doesn't matter, there's not a mortgage, etc. But we watch and we watch the knock-on effect.

'I will say that if you look at the UK as a whole everywhere, bar Northern Ireland, we are now seeing house prices beginning to recover.'

A study by LSL Property Services this past week found that house prices are around £12,000 higher than a year ago, while Rightmove found that it had risen by £14,000 across England and Wales, with the average asking price now £243,861.

The rise in London is more pronounced, with average prices smashing the £400,000 barrier for the first time last month, while Savills and Property Database found that of the 43 areas where average prices have broken the £1million mark, 34 of them were in the capital, with the rest in its commuter belt.

The foreign-investor-fuelled boom in the capital has prompted a response from the coalition, which will close a loophole that meant foreign property owners did not have to pay capital gains tax on their UK sales.

London effect: While the effect of house price rises in London was boosting the overall annual increase to just over 5 per cent, even if London were taken out of the equation house prices around the country have risen substantially since last summer.

The Bank of England and the Treasury reined in its Funding for Lending scheme as of last month, which means banks will no longer be able to use its cheap cash to fund mortgage lending.

There has also been concerns raised about the impact of the Government's Help to Buy scheme, in part of which see the Government acts as a guarantor on 5 per cent mortgages.

But Mr Carney described the impact as 'pretty small', adding: 'It's all outside of London. It's for lower priced houses as a whole and it's mainly first-time buyers.

'So it's not driving the housing market, but we have a responsibility to watch it and we will speak out if we are concerned.'

He added: 'We have to be very conscious and we are very conscious of the history, the economic history in Britain, and there is a history of boom and subsequent bust in the housing market.

'That's one of the reasons why the Bank of England has been given additional powers and one of the reasons, as of last November, we started to use those powers.

'So we've tightened up on underwriting standards, we've tightened up on capital standards, we've taken away special stimulus programmes that existed before.'